By Danielle Capilla
Chief Com­pli­ance Offi­cer at Unit­ed Ben­e­fit Advisors

IRSReportingUnder the Patient Pro­tec­tion and Afford­able Care Act (ACA), indi­vid­u­als are required to have health insur­ance while applic­a­ble large employ­ers (ALEs) are required to offer health ben­e­fits to their full-time employees.

In order for the Inter­nal Rev­enue Ser­vice (IRS) to ver­i­fy that (1) indi­vid­u­als have the required min­i­mum essen­tial cov­er­age, (2) indi­vid­u­als who request pre­mi­um tax cred­its are enti­tled to them, and (3) ALEs are meet­ing their shared respon­si­bil­i­ty (play or pay) oblig­a­tions, employ­ers with 50 or more full-time or full-time equiv­a­lent employ­ees and insur­ers will be required to report on the health cov­er­age they offer. Sim­i­lar­ly, insur­ers and employ­ers with less than 50 full time employ­ees but that have a self-fund­ed plan also have report­ing oblig­a­tions. All of this report­ing is done on IRS Forms 1094‑B, 1095‑B, 1094‑C and 1095‑C.

Final instruc­tions for both the 1094‑B and 1095‑B and the 1094‑C and 1095‑C were released in Sep­tem­ber 2015, as were the final forms for 1094‑B, 1095‑B, 1094‑C, and 1095‑C.

Form 1094‑C is used in com­bi­na­tion with Form 1095‑C to deter­mine employ­er shared respon­si­bil­i­ty penal­ties. It is often referred to as the “trans­mit­tal form” or “cov­er sheet.” IRS Form 1095‑C will pri­mar­i­ly be used to meet the Sec­tion 6056 report­ing require­ment, which relates to the employ­er shared responsibility/play or pay require­ment. Infor­ma­tion from Form 1095‑C will also be used in deter­min­ing whether an indi­vid­ual is eli­gi­ble for a pre­mi­um tax credit.

Form 1094‑C con­tains infor­ma­tion about the ALE, and is how an employ­er iden­ti­fies as being part of a con­trolled group. It also has a sec­tion labeled “Cer­ti­fi­ca­tions of Eli­gi­bil­i­ty” and instructs employ­ers to “select all that apply” with four box­es that can be checked. The sec­tion is often referred to as the “Line 22” ques­tion or box­es. Many employ­ers find this sec­tion con­fus­ing and are unsure what, if any, box­es they should select. The box­es are labeled:

  1. Qual­i­fy­ing Offer Method
  2. Qual­i­fy­ing Offer Method Tran­si­tion Relief
  3. Sec­tion 4980H Tran­si­tion Relief
  4. 98% Offer Method

Dif­fer­ent real world sit­u­a­tions will lead an employ­er to select any com­bi­na­tion of box­es on Line 22, includ­ing leav­ing all four box­es blank. Prac­ti­cal­ly all employ­ers except a mid-size employ­er that did not qual­i­fy for tran­si­tion relief should select Box C, and cor­re­spond­ing with that, most employ­ers will enter let­ter either “A” or “B” in Part III Col­umn (e) of the 1094‑C. Very few employ­ers will be able to select Box D unless they offer min­i­mum val­ue, min­i­mum essen­tial, afford­able cov­er­age to all employ­ees. Employ­ers who do not use the fed­er­al pover­ty lev­el safe har­bor for afford­abil­i­ty will nev­er select Box A or Box B, and cor­re­spond­ing with that, will nev­er use codes 1A or 1I on Line 14 of a 1095‑C form.

To ful­ly under­stand each box, includ­ing plain lan­guage expla­na­tions of the form instruc­tions, request UBA’s ACA Advi­sor, “IRS Report­ing Tip: Form 1094‑C, Line 22”.

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