July 15, 2020
On July 13, 2020 the IRS released the draft 2020 iteration of the Form 1095-C. At first glance, it appears there have been significant changes to the Form. However, in reality, most employers will complete the Form 1095-C exactly the way they did in previous years. The remainder of this article briefly discusses the changes made in the draft Form 1095-C.
The first change a person notices when examining the draft is that there is a space for an “Employee’s Age on January 1” listed in the title section of Part II of the draft Form. The addition of this section, and the addition of every new section on the draft Form 1095-C, is related to individual coverage HRAs which for the first time in 2020 could be utilized by employers to satisfy the employer shared-responsibility (ESR) requirements. While this new section is not discussed in the “Instructions for Recipient” part of the draft Form 1095-C, it can be presumed that this section will only need to be completed by employers who utilized individual coverage HRAs as part of their ESR requirement strategy. If an employer utilized individual coverage HRAs, the employer will need to know the employee’s date of birth to be able to complete this new section.
Additionally, the draft Form 1095-C includes a new line, line 17, in Part II. Line 17 asks about the ZIP code the employer used for determining affordability if an employer utilized individual coverage HRAs. Again, this new line will be irrelevant for employers who did not adopt individual coverage HRAs as part of their ESR requirement strategy. If an employer utilized individual coverage HRAs and completes line 14 with code 1L, 1M, or 1N, line 17 should be completed with the ZIP code of the employee’s primary residence (note that this should generally be the same as line 6 in Part I). Alternatively, if an employer utilized individual coverage HRAs and completes line 14 with code 1O, 1P, or 1Q, the employee’s primary work location ZIP code should be entered on line 17 (note that this could be the same as line 13 Part I but might not if the employer has multiple work locations).
As a result of the new individual coverage HRAs satisfying an employer’s ESR requirement responsibility, the draft Form 1095-C added eight new line 14 codes that can be used by employers. The following are a list of the eight new line 14 codes and the details provided by the “Instructions for Recipient” part of the draft Form 1095-C:
1L - Individual coverage health reimbursement arrangement (HRA) offered to you only with affordability determined by using employee’s primary residence location ZIP Code.
1M - Individual coverage HRA offered to you and dependent(s) (not spouse) with affordability determined by using employee’s primary residence location ZIP Code.
1N - Individual coverage HRA offered to you, spouse and dependent(s) with affordability determined by using employee’s primary residence location ZIP Code.
1O - Individual coverage HRA offered to you only using the employee’s primary employment site ZIP Code affordability safe harbor.
1P - Individual coverage HRA offered to you and dependent(s) (not spouse) using the employee’s primary employment site ZIP Code affordability safe harbor.
1Q - Individual coverage HRA offered to you, spouse and dependent(s) using the employee’s primary employment site ZIP Code affordability safe harbor.
1R - Individual coverage HRA that is NOT affordable offered to you; employee and spouse or dependent(s); or employee, spouse, and dependents.
1S - Individual coverage HRA offered to an individual who was not a full-time employee.
The line 14 codes 1T through 1Z are also listed on the draft Form 1095-C and state that they will be reserved for future use. We recommend these codes be eliminated for the final copy as they serve no purpose and have never been assigned under any iteration of the Form 1095-C.
The final change is line 15 will be completed for some of the new codes added as a result of the individual coverage HRAs. If line 14 is completed with 1B, 1C, 1D, 1E, 1J, 1K, 1L, 1M, 1N, 1O, 1P or 1Q, line 15 must be completed. If line 14 is completed with one of the other codes, line 15 should be left blank.
While the draft Form 1095-C may alarm employers upon first glance, in reality most employers will not be impacted by the new sections and codes. Only employers who adopted individual coverage HRAs will need to be concerned with the new details of the draft Form 1095-C. We anticipate the IRS will release the draft instructions to the Forms 1094-C and 1095-C in the coming weeks which will provide additional details. We take great pride in offering affordable and comprehensive services to all of our clients which has led to no Accord Systems client receiving an ACA penalty related to reporting. If you have any questions regarding Affordable Care Act reporting, please don’t hesitate to contact us.
About the author – Ryan Moulder serves as General Counsel at Accord Systems, LLC and is a Partner at Health Care Attorneys P.C. Ryan received his LL.M. from Georgetown University Law Center and his J.D. from Saint Louis University School of Law. He has distinguished himself as a leader in the Affordable Care Act arena and has written and spoken on a variety of ACA topics as it relates to compliance for companies.
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