FORM 1095-C FAQ

Form 1095-C FAQ1095-C FAQ ALE

ALE Reporting:

This list of FAQs has been compiled from common questions posed by clients regarding reporting obligations on  Form 1095-C. For purposes of these FAQs:

  • An applicable large employer (ALE) means an employer who employed on average at least 50 full-time employees (including full-time equivalent employees) in the preceding calendar year.
  • An ACA FTE is an employee of the ALE who had on average at least 30 hours of service a week (or 130 hours of service a month) as determined under the applicable measurement method (i.e., monthly or look-back).
  • Minimum essential coverage (MEC) means employer-sponsored group health plan coverage unless otherwise noted. Minimum value (MV) means a plan that pays at least 60% of the total benefits.
  • Calendar year (CY) means January 1 – December 31 and generally refers to CY 2015, unless otherwise noted.

1. An ALE sponsors an insured group health plan. Coverage is offered to employees who work at least 20 hours per week. Who receives a Form 1095-C?

The ALE provides a Form 1095-C to any individual who is an ACA FTE for at least one month of the calendar year.

Each ACA FTE must receive a 1095-C that describes the offer (or no offer) of coverage made for each month of the calendar year. The ALE completes Parts I and II of the Form 1095-C (and not Part III). The health insurance carrier issues a Form 1095-B to the covered individual (including any family members) that provides information on MEC.

Individuals who are not ACA FTEs for any month of the CY (e.g., part-time employees who average 20 hours of service a week throughout the calendar year) do not receive a Form 1095-C. If the individuals are enrolled in MEC through the group health plan, the carrier will issue a 1095-B.

2. Does the answer in Q/A-1 change if the group health plan is self-insured?

Yes.

If the plan is self-insured, then:

a.The ALE provides any individual who is an ACA FTE for at least on month of the CY with a Form 1095-C and completes Parts I and II. This describes the offer (or no offer) of coverage made for each month of the CY.If the ACA FTE is covered under the ALE’s self-insured group health plan for at least one month of the CY, then the ALE completes Part III of Form 1095-C to reflect the months of coverage (including coverage of family members).

b.In addition, any individual who is the primary insured for one month of the calendar year will receive a Form 1095-C that reflects the coverage of the primary insured and family members. This may include:

  • Employees who are not ACA FTEs (e.g., a 20 hour/week part-time employee who takes the self-insured health plan coverage).
  • A COBRA qualified beneficiary who has COBRA through the self-insured plan and is a former employee of the ALE that was not employed during the applicable calendar year.
  • A retiree of the ALE who receives coverage through the self-insured health plan even though he was not employed by the ALE during the calendar year.
  • A divorced spouse who receives coverage through COBRA under the self-insured health plan even though he was never an employee of the ALE.
  • A child who receives coverage through COBRA under the self-insured health plan of the ALE due to aging out of the health plan even though she was never an employee of the ALE.

    The Road to ACA Tax Compliance

    IRS Extends 1094 and 1095 Deadlines to March 31, 2016 and May 31, 2016 respectively.

Important to note:

  • No Form 1095-C is provided to individuals who are not ACA FTEs and do not have coverage for any month of the CY through the self-insured plan (e.g., a part-time employee who declined the ALE’s offer of coverage does not receive a Form 1095-C).
  • If the ACA FTE declines the offer of self-insured coverage, the ALE still must provide him with a Form 1095-C which reflects:
    • the offer of coverage (e.g., 1E in line 14);
    • the cost for self-only coverage in the lowest cost MV plan (line 15); and
    • any safe harbor code that applies (e.g., 2H for the rate of pay safe harbor).

3. How do you report for the individuals described in (b) of Q/A-2?

Non-ACA FTEs who have coverage through an ALE’s self-insured plan must receive information regarding the months of the CY for which they had MEC. The easiest way to report on these individuals is to use Form 1095-C because ALEs are already using this Form to report on all ACA FTEs. In the case of the individuals described in section (b):

  • Complete Part I.
  • In Part II, use Code 1G in line 14 and do not complete lines 15 or 16.
  • In Part III, list the primary insured and any covered family members (including SSN or DOB). Then check the boxes to reflect the months of the CY that the individual(s) has MEC through the self-insured plan.Alternatively, an ALE may use Form 1095-B to report MEC to covered individuals and then use Form 1094-B in the IRS submission process. This may create additional work as the “B” Forms are different from the “C” Forms that the ALE must complete. For consistency and administrative ease, many self-insured ALEs are meeting their reporting obligations through the “C” Forms.

4. An ALE uses the look-back measurement method to determine its ACA FTEs. The ALE hires summer seasonal employees each year and uses a 12-month Initial Measurement Period (IMP) to determine if these new hire seasonal employees are ACA FTEs. While they work 40 hours a week during the season, after 4 months employment terminates and these individuals are not hired back for another 8 months (if at all). These individuals are not eligible for health insurance. Is the ALE required to provide them with a Form 1095-C?

No.

A “limited non-assessment period” is a waiting period, including an IMP and initial administrative period (IAP). An ALE does not need to file a Form 1095-C for an individual who, for each month of the calendar year, is in a limited non-assessment waiting period. So in this specific example, no 1095-C is required with respect to these seasonal employees because they:

1. are in a limited non-assessment period (the IMP), and
2.are not covered by the ALE’s self-insured health plan for any month of the calendar year.

The result is the same if these individuals were new hire part-time employees and at the end of the IMP were identified as non-ACA FTEs and were not offered health insurance coverage.

Important to note:

1. If, at the end of the IMP (and IAP) the employee is identified as an ACA FTE, then reporting on Form 1095-C would be required for the entire calendar year that includes the end of the IMP

2.Use 1H (line 14) and 2D (line 16) for each month during the calendar year the individual was in a limited non- assessment period.

3.Once the IMP (and IAP) is over and the individual earns ACA FTE status in the CY, then use:

  • In line 14: 1A, 1E or 1H (offer of coverage codes); and
  • In line 16:
    • 2C if the individual has coverage under the plan; or
    • the applicable safe harbor code if affordable coverage was offered and the employee declined(2F, 2G or 2H), or
    • if code 1H is used or the offer of coverage is unaffordable, leave line 16 blank.
  • See Q/A-13 for a similar example.

5. ALE has union workers who are ACA FTEs. The ALE is required by a collective bargaining agreement to make contributions for the union employees to a multiemployer plan. The multiemployer plan offers affordable and MV health coverage to the union employees and their children to age 26. Who is responsible for providing Form 1095-C and what codes are used in this situation?

The ALE has the obligation to furnish Form 1095-C to its identified union ACA FTEs.

Even though the ALE does not directly provide the health insurance coverage to the union employee, the ALE
is treated as offering MEC to an employee if the ALE is required by a collective bargaining agreement or related participation agreement to make contributions for that employee to a multiemployer plan that offers, to individuals who satisfy the plan’s eligibility conditions, health coverage that is affordable and provides MV, and that also offers health coverage to those individuals’ dependents (multiemployer arrangement interim guidance).

For reporting offers of coverage for CY 2015, an ALE should enter code 1H on line 14 for any month for which the ALE enters code 2E on line 16 (indicating that the ALE was required to contribute to a multi-employer plan on behalf of the employee for that month and therefore is eligible for multiemployer interim rule relief). For this purpose the ALE only completes Parts I and II.

 

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number):

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1H

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2E

The multiemployer plan is required to issue a Form 1095-B to any covered union employee reflecting the union’s MEC during the CY.

6. An ALE offers MEC that provides MV and is affordable. What affordability safe harbor is used and how is it illustrated on Form 1095-C?

There are three affordability safe harbors:

W-2 safe harbor (Code 2F): Coverage is affordable if the employee’s required annual contribution for self-only coverage in the lowest cost MV plan does not exceed 9.56% of Box 1 W-2 wages (does not include any elective deferrals to a 401(k), 403(b) or cafeteria plan).

Federal Poverty Level (FPL) safe harbor (Code 2G): Coverage is affordable if the employee’s required monthly contribution for self-only coverage in the lowest cost MV plan does not exceed 9.56% of the monthly income for a single individual at 100% of FPL. For 2015, this amount is $93.77 in the 48 contiguous states. For 2016, 9.56% increases to 9.66% ($95.63 for FPL safe harbor).

• Rate of Pay safe harbor (Code 2H): Coverage is affordable if the employee’s required monthly contribution for self- only coverage in the lowest cost MV plan does not exceed:

  • for hourly employees, 9.56% of the employee’s hourly rate multiplied by 130 hours, or
  • for salaried employees, 9.56% of the employee’s monthly salary.

Generally, these safe harbors are used in Line 16 when the ALE offers ACA FTEs affordable (under one of the safe harbors) MV coverage and the employee declines the coverage. This demonstrates to the IRS that the ALE should not be penalized with respect to this employee as he received an offer of MV/affordable coverage in accordance with the employer mandate.

If the employee takes coverage under the affordable/MV plan, Code 2C is used in line 16 (as opposed to the applicable safe harbor).

If the ALE did not use a safe harbor or coverage is unaffordable, line 16 is left blank.

  1. An ALE sponsors a fully-insured group health plan for the first six months of CY 2015. In July, the ALE changed to a self-insured group health plan. Should the ALE complete two Forms 1095-C to reflect the funding change?   No.
    The ALE may only complete one Form 1095-C for each employee. The plan changes will be reflected on the same form.Generally, if the plan is insured, the ALE is not required to complete Part III of Form 1095-C. Given the mid-CY change in funding structure, the ALE will need to complete Part III for the months of the CY the plan was self-insured.
  2. An ALE offers MEC that provides MV and is affordable to 100% of its ACA FTEs. For 2015, the cost of employee’s share for self-only coverage is $100/month. Can the ALE select 1A (Qualifying Offer) for line 14 on Form 1095-C?No.
    An ALE may only select 1A (Qualifying Offer) if all of the following apply:
    • The offer is made for all 12 months of the CY;
    • The employee contribution for self-only coverage that meets MV does not exceed $93.77/month (2015); and • There is an offer of MEC to a spouse and dependents, if applicable.In this example, the employee’s contribution for self-only coverage in the lowest cost MV plan exceeds $93.77, so the ALE would not select 1A (Qualifying Offer). Instead, the ALE would select 1E and complete line 15 reflecting the $100/ month contribution for self-only coverage.
  3. An ALE sponsors a group health plan. An ACA FTE had coverage under the plan and then terminated employment during the CY. What codes are used in lines 14 and 16 for the months following the qualified event? Because COBRA continuation of coverage was offered due to termination of employment, the ALE uses code 1H in line 14 and code 2A in line 16, regardless of whether the employee elected COBRA.If the group health plan is self-insured and the employee (or family member) elects COBRA continuation of coverage, the months of coverage (both active and COBRA) must be reflected in Part III.
  4. An ALE sponsors a MV group health plan that is affordable under a safe harbor. An employee earned ACA FTE status during the standard measurement period (SMP) for the entire stability period (SP). The employee elects coverage under the plan. The employee’s hours were reduced during the SP. Under the terms of the group health plan, eligibility for group health plan coverage is lost when hours drop below 130/month in the SP. Therefore, the individual has a COBRA qualified event (a reduction in hours) with a loss of eligibility for group health plan coverage. How is this illustrated in Part II of Form 1095-C?  If an ALE offers COBRA due to a reduction in hours, then the ALE will use the following Codes:
  • Line 14 – use the 1 Code that corresponds with the offer made (this is likely Code 1E as COBRA qualifies as an offer of MEC)
  • Line 15 – use the cost the individual has to pay for self-only coverage (likely the full COBRA premium for self-only coverage)
  • Line 16:

• If enrolled in COBRA, use code 2C

This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations.You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional.

• If COBRA is not elected, line 16 is left blank unless the ALE can use an affordability safe harbor (codes 2F, 2G, or 2H). However, because most ALEs charge the full COBRA premium to COBRA beneficiaries the offer of COBRA is likely an offer of unaffordable coverage and Line 16 is left blank (as illustrated below).

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 01

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

$50

$50

$50

$50

$50

$400

$400

$400

$400

$400

$400

$400

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2C

2C

2C

2C

2C

Important to note: In this scenario, the employee earned ACA FTE status through the end of the SP. If the employee declines the offer of unaffordable coverage (COBRA) and receives a subsidy in the Marketplace, this ALE will be penalized for each month that the ACA FTE has unaffordable coverage (the “B” penalty)

11. SamefactsasQ/A-10,buttheALE’seligibilitytermscontinuecoveragethroughtheSPeventhoughtherehas been a reduction in hours. The ALE’s cafeteria plan includes a permitted election change rule that allows the employee to drop coverage even though he did not lose coverage as a result of the reduction in hours. The employee elects to drop coverage and take coverage through his spouse’s health plan. How is this illustrated in Part II of Form 1095-C?

In this case, it is reported as follows:

• Line 14 – use the 1 Code that corresponds with the offer made (Code 1A or 1E)

• Line 15 – if using Code 1E then state the cost for self-only coverage in the lowest cost MV plan (likely the same code as before the individual had the reduction in hours)

• Line 16:
• Use the safe harbor code that applies (codes 2F, 2G, or 2H)

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 01

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2C

2C

2C

2C

2C

2G

2G

2G

2G

2G

2G

2G

 

In this scenario, a penalty would not apply because the ALE continues to offer the ACA FTE MV coverage that is affordable under the FPL safe harbor (2G) for the duration of the SP. If the employee went to the Marketplace to purchase coverage, he would not qualify for a subsidy as he has an affordable offer of ALE-provided health insurance through the end of the SP.

12. What codes are used to show a mid-month hire or a mid-month termination?

If an employee was hired mid-month, use code 1H on line 14 and code 2D on line 16. An employee was hired June 15 with coverage effective first of the month following date of hire and the employee elects coverage.

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 01

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1H

1H

1H

1H

1H

1H

1E

1E

1E

1E

1E

1E

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

$50

$50

$50

$50

$50

$50

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2A

2A

2A

2A

2A

2D

2C

2C

2C

2C

2C

2C

In most cases, if an employee is terminated from an ALE mid-month, coverage continues through the end of the month (then COBRA is triggered with the loss of coverage). In this case, because the employee continues to receive the offer of coverage in this month, use:

• 1A or 1E in line 14

• In line 16 use either: 2C if the employee has coverage, or the applicable safe harbor code if no coverage, or leave blank if no safe harbor applies.

For example, assume the employee terminates employment May 15 and has coverage through May 31.

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 01

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1E

1E

1E

1E

1E

1H

1H

1H

1H

1H

1H

1H

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

$50

$50

$50

$50

$50

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2C

2C

2C

2C

2C

2A

2A

2A

2A

2A

2A

2A

 

In the case where coverage is lost as of the date of termination and an employee is terminated mid-month, use code 1H on line 14 and code 2B in line 16. In this instance, code 1H is used because an offer is considered to be made if the employee was eligible for coverage every day of the month. If the employee is not eligible for even one day, an offer is not considered to have been made.

For example, assume the employee terminates employment May 15 and coverage is lost effective May 15.

13. An ALE offers MEC that is not a MV plan to employees and their dependents (also referred to as a “skinny plan”). What Codes are used?

An ALE will use code 1F on line 14 and will not complete line 15. If the employee has coverage through the “skinny plan,” use code 2C in line 16. If the employee declines coverage in the “skinny plan”, leave line 16 blank.

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 01

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1F

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

The ALE has made an offer of MEC which insulates the ALE from an “A” penalty. However, because it is not MV, the affordability safe harbors are not available. ALE has potential “B” penalty exposure if the individual declines the coverage and receives a subsidy in the Marketplace.

14. An ALE offers MEC that provides MV and is affordable under the FPL safe harbor. The ALE uses a look-back measurement period to determine ACA FTE status. A new hire variable hour employee is in his IMP from January to May of the CY and in an IAP in June and July. The ALE determines the employee earned ACA FTE status and the employee enrolls effective August 1, 2015. What codes are used for the year?

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 01

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1H

1H

1H

1H

1H

1H

1H

1E

1E

1E

1E

1E

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

$50

$50

$50

$50

$50

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2D

2D

2D

2D

2D

2D

2D

2C

2C

2C

2C

2C

This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations.You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional.

15. Same facts as in Q/A-13, except this ongoing employee was measured as not an ACA FTE in prior SMP. Thus he was not eligible for health insurance coverage for August 1, 2014 – July 31, 2015. For the upcoming SMP and SP (that begins August 1, 2015) the individual becomes an ACA FTE and elects MV and is affordable under the FPL safe harbor. What codes are used for the year?

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 08

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1H

1H

1H

1H

1H

1H

1H

1E

1E

1E

1E

1E

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

$50

$50

$50

$50

$50

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2B

2B

2B

2B

2B

2B

2B

2C

2C

2C

2C

2C

16. An ACA FTE was offered health coverage and is enrolled from January to May. From June to August, the employee goes on approved leave under the Family Medical Leave Act (FMLA). From June to August the employee is enrolled in health coverage, what codes are used? Employee returns to employment after the leave.

The employee is coded in the same manner as the codes used from January to May. The fact that the employee was not actively working does not affect coverage coding unless the employee decided not to continue health coverage during FMLA leave.

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 01

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1E

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

$50

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2C

If the employee elects to drop health insurance coverage during the period of FMLA leave, then line 16 will reflect any applicable affordability safe harbor (2G, 2F or 2H) or is left blank if a safe harbor does not apply.

 

Part II

Employer Offer and Coverage

Plan Start Month (Enter 2-digit number): 08

All 12 months

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

14 Offer of Coverage (enter required code)

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

1E

15 Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

16 Applicable Section 4980H Safe Harbor (enter code, if applicable)

2C

2C

2C

2C

2C

2G

2G

2G

2C

2C

2C

2C

17. Doself-employedindividualsreceiveaForm1095-C?

A self-employed individual includes a sole proprietor, a partner in a partnership, a 2% shareholder in an S-Corp and a member/owner of an LLC, who would be treated as a partner for tax purposes.

For an insured group health plan, these individuals are not ACA FTEs, because they are not considered employees of the ALE. As such, these individuals do not receive a Form 1095-C. ALEs should discuss the status of individuals who go from a common law employee (W-2) status to self-employed status mid-year as the implications may vary and additional reporting may be necessary If the self-employed individual is covered through the insured group health plan, then the insurance carrier will issue the individual a Form 1095-B to reflect MEC.

For a self-insured group health plan, if the individual is enrolled in coverage under the group health plan for at least one month of the calendar year, that individual receives a Form 1095-C for that calendar year, with code 1G on line 14. This reflects the individual’s MEC during the calendar year under the self-insured health plan. However, if a partner or 2% S-Corp shareholder declined coverage for the entire calendar year, then a Form 1095-C is not provided.

This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations.You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional.