Eliminating Some of the 200 Possible Outcomes for Part II of the Form 1095-C
The calendar year is quickly coming to an end which means all employers will finally have all the data necessary to file the Form 1094-C and Form 1095-C. All Applicable Large Employers, even employers utilizing the Fewer Than 100 Full-Time Employees Transition Relief, must file a Form 1094-C and Form 1095-C for the 2015 calendar year. Of greater importance is the Form 1095-C must be provided to each employee who was a full-time employee of the employer for any month of the 2015 calendar year. An employee in a limited non-assessment period is not considered a full-time employee for purposes of the Form 1094-C or Form 1095-C. Additionally, an employer who offers self-insured coverage is responsible for completing the Form 1095-C (including Part III) for any employee who enrolls in health coverageregardless of whether the employee is a full-time employee for any month of the calendar year. The Form 1095-C (or similar statement if the employer is utilizing one of the Qualifying Offer Methods) must be furnished to the employee by February 1, 2016. The deadline will be satisfied so long as the form is properly addressed and mailed on or before February 1, 2016.
Part I of the 1095-C should be simple enough for an employer to complete. Part I requires information to be completed regarding the employee and the Applicable Large Employer Member. Part II is where the crux of the Form 1095-C occurs and is the part that will be explored in detail in this article.
First, the Plan Start Month is optional for the 2015 calendar year so employers do not need to complete the box. The real challenge is presented bythe 200 possible combinations for line 14, 15, and 16. There are ten possible entries for line 14 (1A, 1B, 1C, 1D, 1E, 1F, 1G, 1H, 1I, and Leave Blank), two possible entries for line 15 (Complete or Leave Blank), and ten possible entries for line 16 (2A, 2B, 2C, 2D, 2E, 2F, 2G, 2H, 2I, and Leave Blank).
Some of the options in the paragraph above are clearly always incorrect. For example,a code must be entered on line 14 for each calendar month, even if the employee was not a full-time employee for one or more of the calendar months. Therefore, the “Leave Blank” option for any month on line 14 is really not an option at all. Furthermore, the Form 1095-C instructions make it clear that line 15 should only be completed if 1B, 1C, 1D, or 1E is entered on line 14. Taking the inverse of that statement line 15 should not be completed if 1A, 1F, 1G, 1H, or 1I is entered on line 14. Applying these two rules eliminates 110 of the 200 possible combinations for line 14, 15 and 16. Of the remaining 90 possible outcomes only 48 are true outcomes and some of these 48 are only theoretically possible and could only be expected to be seen in the most bizarre circumstances.
Unfortunately, the rules whittling down the remaining 90 options are not as simple as the two rules that eliminated 110 of the options discussed above. Instead, a careful reading of the instructions, some abstract thought (and sometimes even some assumptions) must be made to produce the list of the 48 true outcomes.
When discovering the 48 true outcomes we tried to view the Form 1095-C in the light most advantageous to the employer (without advocating lying or even deception). For instance if code 1F is inserted on line 14 we know line 15 must be left blank as that is clearly stated in the Form 1095-C instructions. How line 16 should be completed is a little less clear. The final regulations for Health Insurance Premium Tax Credits state an employee who accepts an employer’s offer of a minimum essential coverage (MEC) plan is not eligible for a premium tax credit regardless of whether the employer’s offer provides minimum value or is affordable (see §1.36B-2(c)(3)(vii)). Consequently, an employee who accepts an employer’s offer of a MEC plan for a month could never trigger a 4980H(b) penalty for that month. Knowing this, and thinking about it from an employer’s perspective, we think it is prudent (and allowable if not required under the instructions) to enter 2C on line 16 for any month in which the employee accepts an employer’s offer of a MECplan even if the coverage does not provide minimum value. If line 16 were left blank, the code combination of line 14 – “1F” and line 16 – “Leave Blank” is one of the five code combinations that could trigger a 4980H(b) penalty with respect to an employee. That is not an accurate representation for an employee who accepts an employer’s offer of a MEC plan regardless of whether the coverage provides minimum value.
The rest of the line 1F options are illustrated in the chart below. The code 2I is perhaps the most perplexing of all the codes and it presents some really odd situations that would only occur in the rarest of rare situations.
Line 14-16 Combination Matrix with ExplanationLine 14 / 1F – a MEC plan not providing minimum value offered to employee; employee and spouse; employee and dependent(s); or employee, spouse and dependent(s)
Line 15 / Leave Blank
Potential Line 16 Match / Impossible Line 16 Match
Code / Reasoning / Code / Reasoning
2B / Code 2B would apply if the employee accepts the employer’s offer for the month but the employee terminates with the employer in the middle of the month which causes the coverage to end / 2A / Code 2A only applies if an employee was not employed for any day during the month. Code 2A is not compatible with code 1F
2C / Code 2C would apply if the employee accepts the employer’s offer for the entire month / 2D / Code 2D is not compatible with code 1F because an employee in a limited non-assessment period is not offered coverage during the limited non-assessment period months
2I / This scenario could occur if an employer offers a MEC plan to employees and then offers a minimum value plan to the employer for the new non-calendar year plan. (Note the transition relief conditions would need to be satisfied) / 2E / If code 2E is entered, the only code that can be on line 14 is code 1H
Leave Blank / Line 16 would be left blank if an employer offers a 1F level of coverage which is declined by the employee / 2F / Code 2F could never apply because all three of the affordability safe harbors require the offer provide minimum value with respect to the self-only coverage offered to the employee
2G / Code 2G could never apply because all three of the affordability safe harbors require the offer provide minimum value with respect to the self-only coverage offered to the employee
2H / Code 2H could never apply because all three of the affordability safe harbors require the offer provide minimum value with respect to the self-only coverage offered to the employee
For brevity we will spare the readers from the other eight templates that explain the combinations that are possible verses those that are impossible. With transition relief ending in 2015 some of the codes will be irrelevant in 2016 which,along with a year of experience,should make the process a little simpler in subsequent years.
We are hopeful the government will find more ways to simplify the process for the 2016 calendar year. For example, we believe unnecessary confusion was created by embedding three very different coding options in 2B. The first code 2B scenario applies if the employee is not a full-time employee for the month and did not enroll in a MEC plan, if offered for the month. The second code 2B scenario applies if the employee is a full-time employee for the month and whose offer of coverage (or coverage if the employee was enrolled) ended before the last day of the month solely because the employee terminated employment during the month (so that the offer of coverage or coverage would have continued if the employee had not terminated employment during the month). It is easy to see the unnecessary confusion by reviewing only the first two code 2B scenarios. The first code 2B scenario requires the employee not to be a full-time employee while the second code 2B scenario, to the contrary, requires the employee to be a full-time employee. Despite the scenarios blatant differences, the two scenarios are both coded using 2B. To make code 2B more confusing, the final scenario, which will only be possible in 2015, occurs if the employee was offered health coverage no later than the first day of the first payroll period that begins in January 2015 and the coverage offered was affordable for purposes of the employer shared responsibility provisions.
This further complicates matters as some of the line 14 codes only work with one (or two) of the code 2B scenarios. For example, code 1H is only compatible with the third scenario of 2B and only in January of 2015. When coding software, which is vital for larger employers completing 10,000 or more Form 1095-Cs, certainty makes things a lot easier. By clumping three codes into 2B the government created unnecessary complications. More coding options in the future would make things simpler for employers (and coders) to complete the already complicated Form 1095-C.
Part III of the Form 1095-C is only completed by employers who provided self-insured coverage. The information in Part III is self-explanatory and will not be completed by an employer offering a fully insured plan.
Employers should have already begun the process of completing the Form 1095-C as the deadline is fast approaching. If an employer has not taken any action, the preparation of the data to complete the Forms needs to begin immediately. In the coming weeks we hope to provide additional articles exploring the intricacies of these forms to assist employers with this cumbersome, yet necessary, process.
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