Hunton Employment & Labor Perspectives

The IRS has issued final versions of Forms 1095-C and 1094-C as well as updated final instructions on completing these forms. While the instructions and forms remain similar to those used last year, there are a few key changes worth noting.

In general, the Forms 1094-C and 1095-C are used by “applicable large employers,” or “ALEs,” to report offers of coverage to their full-time employees (those working 30 or more hours per week) as required under the Affordable Care Act, as well as by self-insured plan sponsors to report individuals covered under their plans.

The key changes to the forms and instructions include the following:

            Conditional offers to spouses.  New codes 1J and 1K were added to Form 1095‑C, line 14 to facilitate reporting of conditional offers to spouses. A “conditional offer” is an offer that is subject to one or more reasonable, objective conditions – such as an offer to cover an employee’s spouse only if the spouse is not eligible for coverage under Medicare or a group health plan sponsored by another employer. The instructions allow an employer to report a conditional offer to a spouse as an offer of coverage regardless of whether the spouse meets the condition, but the employer should be prepared to provide, upon request, a list of any and all applicable conditions.

Code 1J applies if minimum essential coverage (MEC) providing minimum value is offered to the employee, and MEC is conditionally offered to the spouse, but no MEC is offered to dependents. Code 1K applies if MEC providing minimum value is offered to the employee,  and MEC is offered to dependents and conditionally offered to the spouse.

COBRA reporting. The 2016 instructions offer additional detail and examples for reporting offers of COBRA coverage to former employees, continuing employees and their dependents, as well as reporting offers of post-employment coverage that is not COBRA coverage.

Penalties.  The penalties for failure to file or furnish the forms have increased from $250 to $260 per statement. In addition, the language permitting “good faith” compliance has been removed, although penalties can still be waived if the failure is due to reasonable cause and not willful neglect.

Other changes include the following:

            ALE Aggregated Groups. The new instructions clarify reporting for members of an ALE Aggregated Group (each referred to as an “ALE Member”), including the following:

• Clarification that the reporting obligation is with each ALE Member if the ALE Aggregated Group has more than 50 full time equivalent employees, even if that particular ALE Member has fewer than 50 full time equivalent employees.
• Guidance for determining which ALE Member has the reporting obligation if an employee was employed by more than one ALE Member.
• Examples regarding ALE Members that file multiple Forms 1094-C, for assistance in identifying the authoritative transmittal.

Expanded definitions. The new instructions include expanded definitions of “full time employee” and “employee required contribution” which provide additional clarity.

            Transition relief/interim guidance. The instructions note that qualifying offer transition relief is no longer available, and the applicable box on Form 1094-C is now marked “reserved.”  Certain other transition relief is only available for non-calendar year plans, and only for those months that fall within the 2015 plan year. However, multiemployer plan interim guidance continues to apply for 2016.

Affordability safe harbor. The new instructions clarify that an affordability safe harbor code should not be used on line 16 of Form 1095-C for any month that the ALE member did not offer MEC to at least 95% of its full time employees and dependents.

            Clarifications on forms. There are a few minor clarifying changes on the forms and in the instructions – including updating references to full-time employee counts to make clear that it refers to the definition of “full-time” in the employer mandate regulations, and clarification that Part III of Form 1095-C should only be completed for employees who enroll in self-insured coverage.

The new forms and instructions can be found on the IRS website using the following links:

• Form 1094-C
• Form 1095-C
• Instructions to Forms 1094-C and 1095-C

While not addressed in this blog post, note that the IRS also issued updated forms 1094-B and 1095-B, and instructions for those forms, which can also be found on the IRS website using the links below. Forms 1094-B and 1095-B are generally used by health insurers, and may also be used by self-insured plan sponsors to report offers of coverage to certain non-employees such as retirees.

• Form 1094-B
• Form 1095-B
• Instructions to Forms 1094-B and 1095-B