The following blog post is Part 1 of a 2 part series exploring frequently asked questions regarding the Affordable Care Act’s Employer Reporting Requirements. Part 2 will focus on frequently asked questions related to Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage) and will be posted in the near future.
The employer reporting requirements under The Patient Protection and Affordable Care Act (the “ACA”) are generally effective beginning January 1, 2015, with the applicable reports first filed in early 2016. The purpose of the reporting requirements – particularly those relating to employers – is to enforce the pay or play provisions of the ACA. Therefore, accurate and timely completion of the required Forms 1094-C and 1095-C is necessary to ensure penalties are not imposed. As the reporting deadline looms, many employers still have questions regarding the ACA’s reporting requirements and how best to comply with those requirements. The following is a list of the most frequently asked questions we are receiving from employers regarding the Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) under the ACA’s reporting requirements.
Q1: Which employers are subject to the ACA’s reporting requirements?
A1: Generally, all “Applicable Large Employers (“ALE”) are subject to the reporting requirements. An ALE is one with 50 or more full-time and full-time equivalent employees. A small employer (i.e. under 50 FTEs) that self-insures its health benefits is also subject to the reporting requirements.
Q2: On whose behalf must we prepare and file a Form 1095-C?
A2: A Form 1095-C must be filed for each full-time employee who worked for at least one calendar month during the reporting year. A full-time employee is a common-law employee averaging at least 30 hours of service per week (or 130 hours per month). An employer is not required to prepare and file a Form 1095-C for variable hour employees who are in an initial measurement period for all months of employment during the relevant calendar year.
Q3: If an employee was hired midway through the month with coverage effective immediately, which code would be used on Form 1095-C?
A3: The indicator code used will depend on the type of coverage offered to the employee (even if he or she waived coverage) and will only be entered for the first full month that coverage was offered. Therefore, even though coverage is offered mid-month, the Code Series 1 indicator will be entered in the first month in which coverage is offered for each day of the month. Note that the codes specify the type of coverage offered to an employee, the employee’s spouse, and the employee’s dependents. Therefore, the specific code that is used will depend on the coverage offered.
Q4: For line 14 of Form 1095-C, how do we report partial months of coverage due to termination of employment?
A4: An employer is only considered to have offered health coverage for months during which coverage is offered for the full month. However, an exception applies to terminated employees. If an employee terminates before the end of a month, but the employee would have had coverage for the entire month if they had not terminated, the employer can treat them as having been offered coverage for the entire month.
Q5: How is COBRA coverage reported?
A5: Under recent IRS guidance, for the first full month of COBRA coverage, Code 1H applies (No Offer of Coverage) in Line 14 and Code 2A (Employee not employed during the month) applies in Line 16. If the plan is self-insured, the same codes apply for the period of COBRA coverage, however, for the applicable months of coverage, Part III is completed showing the months the individuals are covered under the plan – either as employees or COBRA beneficiaries.
Q6: When reporting the cost of coverage, what dollar amount is reported on Line 15?
A6: For Line 15, which is completed only when Codes 1B, 1C, 1D or 1E are used in Line 14, only the monthly single-only premium amount is used for the base level plan meeting minimum value requirements. Therefore, if an employer offers a PPO, HMO and a HDHP (high deductible health plan), with the HDHP as the base plan meeting minimum value requirements, the monthly premium for the HDHP is entered in Line 15 (regardless of whether the employee is enrolled in that plan).
Q7: Are there circumstances under which an employer can provide a simplified statement to employees rather than a copy of Form 1095-C?
A7: Yes. If the employer makes a “Qualifying Offer” to the employee for all 12 months of the calendar year, and the employee does not enroll in self-insured coverage, then the employer is permitted to send a simplified statement to the employee containing specific information in lieu of a Form 1095-C. A Qualifying Offer is one in which an ALE offers minimum essential coverage that provides minimum value to full-time employees, their spouse and dependents, and the coverage offered is affordable based upon the 9.5% of the Federal Poverty Level safe harbor.