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ACA reporting for the 2020 tax year will be different from years past because of the new Individual Coverage Health Reimbursement Arrangement (HRA) codes.
These new codes, in addition to the standard codes, must be populated on Form 1095-C for full-time employees and communicate critical information about their health coverage for the year. There is a lot to remember when it comes to populating your 1095-C forms and failing to get it right could result in significant ACA penalty assessments from the IRS.
As filing deadlines for the 2020 tax year approach, it is critical that your organization have an understanding of the new and old codes. On Line 14 of Form 1095-C, employers are prompted to enter a code that describes the type of health coverage offered to a particular employee during the 2020 tax year.
See below for a breakdown of the different codes that your organization can use to populate on Line 14.
1A: The 1A code communicates that the individual received a Qualifying Offer, which is an offer of Minimum Essential Coverage that provides Minimum Value, and is affordable under the mainland single federal poverty line, and the individual’s spouse and dependents received at least Minimum Essential Coverage.
1B: While similar to the 1A code, the 1B code means the individual received an offer of coverage that met minimum essential coverage and minimum value. A 1B code communicates to the IRS that the offer of health coverage was only extended to the employee and not their dependents. A 1B code could expose employers to potential ACA penalty exposure.
1C: A 1C code communicates that the employee and their dependents received an offer of coverage that meets minimum essential coverage and minimum value. This code communicates that the employee’s spouse was not offered coverage.
1D: A 1D code communicates that the employee and their spouse received an offer of coverage that meets Minimum Essential Coverage and Minimum Value. This code communicates that the employee’s children were not offered coverage.
1E: The 1E code tells the IRS that the employee, their dependents, and spouse received an offer of health coverage that meets Minimum Essential Coverage and Minimum Value. The difference between the 1E code and 1A code is that the 1E code may indicate that the offer of coverage was not affordable, or was affordable under the W-2 Safe Harbor or Rate of Pay Safe Harbor.
1F: The 1F code tells the IRS that the offer of coverage made by the employer to the employee only meets Minimum Essential Coverage. A 1F code does not meet Minimum Value.
1G: A 1G code communicates to the IRS that an offer of health coverage was extended to a non-full-time time employee.
1H: This code communicates one of two things to the IRS. One, that an offer of coverage was not made or two, that an offer of coverage that did not meet minimum essential coverage was offered
1L: The 1L code communicates that an individual coverage HRA was offered to an employee and the affordability was determined using the employee’s primary residence ZIP code.
1M: Similar to the 1L code, the 1M code tells the IRS that an individual coverage HRA was offered to the employee and their dependent(s). The affordability is determined using the employee’s primary residency ZIP code.
1N: The 1N code tells the IRS that the employee and their spouse and dependent(s) were offered an individual coverage HRA., with the affordability determined using the employee’s primary residency ZIP code.
1O: The 1O code is similar to the 1L code in that an individual coverage HRA was offered to the employee but the affordability for the 1O code is determined by using the employee’s primary employment location ZIP code.
1P: The 1P code tells the IRS that an individual coverage HRA was offered to the employee and their dependent(s,) not their spouse. The affordability is determined using the employee’s primary employment location ZIP code.
1Q: A 1Q code communicates to the IRS that an individual coverage HRA was offered to the employee, their spouse, and dependent(s), with the affordability set using the employee’s primary employment location ZIP code.
1R: 1R codes are used to communicate that the Individual coverage HRA offered to the employee; employee and spouse or dependent(s); or employee, spouse, and dependents is NOT affordable.
1S: The 1S code should be used when an individual coverage HRA is offered to an individual that is not a full-time employee.
For a full list of the codes that could be entered on Line 16 of Form 1095-C, head to our post The Codes on Form 1095-C Explained.
If your organization is unsure of how to properly prepare your 1094-C and 1095-C forms for the 2020 tax year, contact us to see how we can help you meet your ACA Employer Mandate responsibilities with ACA Complete.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs), employers with 50 or more full-time employees and full-time-equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employee, or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
