Form 1095-C Reporting – Are You Prepared? (Benefit Minute)
For calendar year 2015, applicable large employers (50 or more full time equivalent employees in the prior calendar year, determined on a controlled group basis) must furnish a statement (called Form 1095-C) to each full time employee and provide information to the IRS regarding health insurance coverage. On a month-by-month basis using indicator codes established by the IRS, employers must disclose whether each full time employee and spouse and dependent children were offered health insurance coverage, the lowest employee cost for individual coverage, and whether the employee enrolled in coverage. In addition, employers with self-insured health plans must also provide specific information about enrolled employees, spouses and dependents by month. Even if an applicable large employer does not offer health insurance coverage, Form 1095-C reporting is required.
Set forth below is a summary of recent developments and reminders regarding the Form 1095-C reporting requirement based on the final form and instructions that were just issued by the IRS.
Reporting COBRA and Retiree Coverage
The final instructions clarify that an offer of COBRA continuation coverage due to termination of employment is not reported as an offer of coverage on Form 1095-C, whether or not the former employee enrolls in COBRA coverage.
An offer of COBRA coverage that is made due to reduction of hours resulting in loss of eligibility is reported in the same manner and using the same codes that apply to active employees (depending on whether the employee enrolls in COBRA, whether the employee is still full time for ACA reporting purposes and whether the COBRA premium meets an affordability safe harbor).
Similar treatment applies to former employees who enroll in pre-65 retiree coverage. In general, the offer of coverage code will be the same code used prior to retirement if the same family members that were eligible for active coverage are also eligible for retiree coverage. The cost will be the cost of single coverage charged to the retiree. This treatment applies until the end of the calendar year in which the employee retired.
If the former employee, spouse or dependent child of a current or former employee is separately enrolled in COBRA or pre-65 retiree coverage, employer reporting is required for as long as these individuals remain covered if the plan is self-insured (consistent with previous guidance from the IRS).
Limited Non-Assessment Periods
The IRS has provided safe harbor code 2D for a limited non-assessment period which is defined as a period during which an employer will not be subject to an employer mandate penalty regardless of whether the employee is offered health coverage during the period. The instructions to Form 1095-C state that certain periods will be considered limited non-assessment periods only if health coverage providing minimum value is offered by the end of the limited non-assessment period. For example, the waiting period for a new full time employee and the initial measurement period for a new variable hour, seasonal or part time employee are limited non-assessment periods if coverage is subsequently offered. A new employee (whether full time, part time or variable hour) not offered health coverage does not have a limited non-assessment period (so employer penalties may apply as of the first month of employment).
Interim guidance for multiemployer arrangements states that an employer is treated as offering health coverage to an employee if the employer is required by a collective bargaining agreement to contribute to a multiemployer plan on behalf of that employee (even if the employee has not met the plan’s eligibility conditions). The final instructions state that for 2015, an employer relying on this interim guidance should enter Code 1H (no offer of coverage) on Line 14 and Code 2E (multiemployer interim rule relief) on Line 16 for all employees to whom this interim guidance applies.
Distribution of Form 1095-C
The Form 1095-C is due to each employee by February 1, 2016 (the form must be properly addressed and mailed on or before this due date). The Form 1095-C must be furnished on paper by mail or hand delivery unless the recipient affirmatively consents to receive it in an electronic format.
Reporting Poses a Challenge for Employers
Proper preparation of the Form 1095-C requires information from a variety of sources (including payroll, HRIS or benefit administration systems, and health plan documents) be collected, organized and translated into the indicator codes that must be used on each form. As employers have begun reviewing systems in place and looking for reporting solutions, they are recognizing that compliance with this reporting requirement will be challenging and costly. Employers who have not yet identified a reporting solution may find themselves with an unmanageable amount of data collection and manual processing in January 2016.