IRS to Require Reporting of ICHRAs on Tax Forms for 2020
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An Individual Coverage Health Reimbursement Arrangement (ICHRA) can be beneficial for employers and employees alike. According to HealthCare.gov, employers can “control costs by providing defined non-taxed reimbursements to employees for qualified health insurance costs.” Employees, in turn, can choose the individual health insurance coverage that works for them and their families.
While individual coverage HRAs are not new, there’s an important change coming that Applicable Large Employers (ALEs) need to be aware of regarding ACA compliance: for 2020, the IRS will require reporting of ICHRAs on 1095-C tax forms. This change to the form corresponds to the change to allow ICHRAs to be treated as minimum essential coverage for ACA Employer Mandate purposes.
Now that we’ve reached Q4 of 2020, ALEs need to be aware of the urgency of upcoming IRS deadlines if they’re providing ICHRAs to their eligible employees. The 2020 1095-C furnishing deadline of January 31, 2021 was recently extended to March 2, 2021; the e-filing deadline remains March 31, 2021.
The 1095-C draft released by the IRS includes new codes related to ICHRAs:
- 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 the 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.
If you’re an Applicable Large Employer and are offering ICHRAs to eligible employees in 2020, click here to connect with our ACA compliance experts for assistance with 1095-C forms reporting.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.
