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1095 Forms and Guidelines

What You Need to Know
to Complete the 1095-C

Most employers are taking on the responsibility of ACA reporting and filing themselves — or at least the data collection part of it before working with
an e-file service.

If you’re a fully insured employer, you’ll complete Parts I and II of the 1095-C,
while those of you with self-insured plans will complete Parts 1, 2 and 3.

Every employee of an ALE who is eligible for insurance should receive a 1095-C. This means eligible employees who decline coverage still receive a 1095-C.

1095-C Filing Guidance

Before you can sit down with the actual forms and start the filing process, you must gather certain employee data. And because nothing is simple, you’ll need
to tap a few different departments or sources to do this, including HR, benefits, payroll and your time-tracking system.

The information you’ll need to complete the forms includes:

Total employee count based on hours of service (including full-time and full-time equivalents) — most likely pulled from payroll or time-tracking system
Employee name, Social Security number and address —
most likely pulled from HR records
Health coverage offered
Employee share of the lowest-cost monthly premium
for self-only coverage
Months the employee was enrolled in coverage
Affordability safe harbor provisions or other relief
If self-insured, information about the covered individuals,
including Social Security numbers and months of coverage —
most likely pulled from HR records and benefits

This information correlates with the parts of the 1095-C as follows:

Part 1 is where you enter identifying information for the employee, such as name, address and Social Security number — and identifying information for you, the employer, such as name, Employer Identification Number and address.

Part 2 is all about the offer of coverage. In the three lines here, you’ll enter information about the health coverage offered by month (if any), the lowest-cost premium for self-only coverage and the months you met an affordability safe harbor provision.

If you’re self-insured, Part 3 is about the health insurance that was supplied
to all covered individuals — including spouses, dependents, retirees and COBRA enrollees. You’ll need Social Security numbers or, if these numbers aren’t available, date of birth. This information isn’t completed by insured employers because it’s captured separately, by the health insurance providers themselves, through the 1095-B.

Pointers for Line 14 on the 1095-C

The bulk of the work in completing the 1095-C will be with Lines 14-16 in Part 2. Although the subject extremely complex, here are a few pointers:

The “Offer of Coverage” on Line 14 — which involves nine codes — describes the type of coverage, if any, offered to an employee, the employee’s spouse and the employee’s dependents.

These codes generally fall under three areas, with MEC meaning minimum essential coverage and MV meaning minimum value:

Qualified offers of coverage

1E — MEC MV for employee, spouse, and dependents (family coverage)

1C — MEC MV for employee and dependents, but not spouse

1G — Offer to part-time employee or non-employee (like retirees and COBRA participants)

Non-qualified offers of coverage

1B — MEC MV for employee only

1D — MEC MV for employee and spouse, but not dependents

1F — MEC doesn’t offer MV

1H — No offer of coverage

Other

1A — Qualified offer under the federal poverty line (FPL) safe harbor for affordability

1I — Qualified offer transition relief

Some Explanation:
Under the Employer Shared Responsibility with the ACA, you may be penalized if you don’t offer minimum essential health coverage to at least 70 percent of your full-time employees and their dependents, and at least one full-time employee receives a premium tax credit through the health insurance marketplace, or Exchange, because of it. (Heads up, this changes to 95 percent of your employees in 2016.)

The types of insurance that generally meet the standard of minimum essential coverage include:

Any employer-sponsored group health plan, whether insured
or self-insured — including retiree plans and COBRA
Coverage under certain government programs, such as Medicare, Medicaid, the Children’s Health Insurance Program (or CHIP)
and TRICARE
Coverage in the individual health insurance marketplace
or Exchange
Other coverage recognized by the Department of Health and Human Services, including self-funded student health coverage and coverage under Medicare Advantage plans
Not included are fixed indemnity coverage, life insurance,
and dental or vision coverage

A second type of penalty may be triggered if you offer minimum essential coverage, as described, but the coverage wasn’t affordable or didn’t provide minimum value — resulting in at least one full-time employee receiving a premium tax credit.

Most broad-based medical plans meet the legal parameters for minimum
value, where the plan pays for at least 60 percent of covered benefits. Regarding affordability, the premium for the lowest cost, self-only minimum value coverage should cost no more than 9.5 percent of an employee’s gross household income — rising to 9.66% of household income in 2016.

You can use three safe harbor tests to determine if the coverage you’re providing is affordable. I won’t cover them fully right now but just so you’re aware, they are the 1: W-2 safe harbor, 2: Federal poverty level safe harbor and 3: Rate of pay safe harbor. These are captured in Line 16.

Quick Tip: If one code applies for the entire
12 months, you only need to enter it once in the “All 12 Months” column.

Pointers for Line 15 on the 1095-C

On Line 15, you’re reporting the lowest-cost monthly premium for employee-only coverage. This is not necessarily the amount the employee paid, but the lowest-cost option. This helps the IRS determine if affordable coverage was
made available to the employee.

You’ll only fill out this section if you entered code 1B, 1C, 1D or 1E on line 14 — either in the “All 12 Months” box or in any of the monthly boxes. To repeat, indicate an amount here only if you used codes 1B, 1C, 1D or 1E on line 14.
Include cents with this figure and don’t round numbers

Also, if you entered 1A on Line 14, nothing needs to be entered here — or on Line 16. Code 1A indicates you made a qualified offer and, in turn, don’t need a safe harbor or other relief.

Pointers for Line 16 on the 1095-C

Line 16 — which involves nine codes again — clarifies issues such as whether an individual was employed during the month, whether the employee was eligible and/or enrolled in coverage, if the employee was in a waiting period or other limited non-assessment period and if any affordability safe harbors apply.

For most employees, the code you’ll use is 2C — employee enrolled in coverage offered.

Otherwise, the reasons for no coverage are:

2A — Employee not employed during month
2B — Employee isn’t a full-time employee
2D — Limited non-assessment period

The affordability safe harbors, which I mentioned a minute ago, fall under codes:

2F — W-2 safe harbor
2G — Federal poverty line safe harbor
2H — Rate of pay safe harbor

That leaves 2E, a code used for multi-employer interim rule relief, and 2I for non-calendar year transition relief.

In a nutshell, you’re giving the IRS a reason why you shouldn’t be penalized under the Employer Shared Responsibility provision — largely due to a transition rule or safe harbor. That being said, keep in mind that a blank in this section is a red flag — and should be avoided! It can be a sign that you didn’t provide coverage — or the coverage wasn’t affordable — both of which could lead to a penalty

Part 3 for Self-Insured Employers

Just to clarify … part 3 only applies if you provide self-funded coverage. This is where you enter information about covered individuals, including employees, dependents and spouses, as well as retirees and COBRA recipients. You’ll need Social Security numbers or, if these numbers aren’t available, date of birth. Again, this information isn’t completed by insured employers because it’s captured separately, by the health insurance providers themselves, through the 1095-B.

 

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