IRS Issues Final 2021 ACA Reporting Instructions
On December 9, 2021, the IRS published the final ACA reporting instructions for the 2021 tax year, including the final 1094-C and 1095-C forms.
As expected, the forms and instructions are nearly identical to the draft forms released in July. Below we’ve covered what you need to know about the final ACA reporting instructions for the 2021 tax year.
Two new codes for Line 14 of the 1095-C
The final instructions include two codes employers can claim on Line 14 of the 1095-C, the 1T and the 1U code.
Employers should use the 1T code when the applicable individual and their spouse receive a Health Reimbursement Arrangement (HRA) offer of coverage, with the affordability determined using the employee’s primary residence zip code. Please note that this code excludes dependents as recipients of the HRA coverage extended.
The 1U code is similar to the 1T, but uses different criteria for determining affordability. Specifically, the 1U code applies when an applicable individual and their spouse receive an HRA offer of coverage from the employer with the affordability determined using the employee’s primary employment site zip code affordability safe harbor. Again, this code excludes the individual’s dependents as recipients of HRA coverage.
Furnishing deadline extended
The IRS recently issued proposed regulations that introduce an automatic extension for furnishing the 1095-C and 1095-B forms annually. The final instructions confirm that employers will have until March 2, 2022, to furnish their ACA full-time employees the respective 1095-C and 1095-B forms if self-funded.
As a reminder, the automatic extension does not apply to the paper and electronic filing ACA reporting deadlines.
Ability to make 1095-C statements available online
The final instructions also include new language regarding the ability for employers to make the 1095-C forms available online to satisfy the furnishing requirement. The instructions do state, however, that certain criteria need to be met to satisfy the furnishing requirement.
If you need assistance establishing an online system for making the 1095-C forms available, or furnishing them via direct mail, contact us to learn about ACA Complete.
ACA reporting is how organizations relay critical information regarding healthcare offered for a particular tax year and is required to comply with the ACA’s Employer Mandate.
Under the ACA’s Employer Mandate, employers with 50 or more full-time employees and full-time equivalent employees are Applicable Large Employers (ALEs) and must:
- Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees (and their dependents) whereby such coverage meets Minimum Value (MV); and
- Ensure that the coverage for the full-time employee is affordable based on one of the IRS-approved methods for calculating affordability.
ALEs that do not meet the aforementioned requirements could be subject to IRS penalties under IRC Section 4980H. The IRS is currently issuing these 4980H penalties via Letter 226J for the 2019 tax year. If you’ve received one of these penalties or another ACA assessment, contact us to learn about your options for responding. So far we’ve helped our clients prevent over $1 billion in ACA penalty assessments.
If you need assistance completing your 1095-C forms for the 2021 tax year, download the Employer’s Guide to Coding ACA Form 1095-C below. This resource provides concrete examples of how to code unique healthcare situations, including HRAs, as well as a glossary of all the different code options available.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.
