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1095-C: Reporting Requirements: A Step-by-Step Guide

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UPDATED: 10.26.2016

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Employers subject to the Affordable Care Act (ACA) must begin collecting certain employee data to meet Section 6056 reporting requirements. Specifically, the ACA requires that certain employers (Applicable Large Employer Members) file Forms 1094-C and 1095-C. A draft version of these Forms was released on October 15, 2014. These forms are a vital part of the ACA because this is how regulators will know whether employers are complying with the ACA. These forms will also be used to substantiate whether employees maintained minimal essential coverage as required by the individual mandate. Covered employers must complete a Form 1095-C for each employee who was considered a full-time employee for any month of the calendar year. Form 1095-C is due to the employee by January 31. Form 1095-C is due to the IRS by February 28 if filing by paper or March 31 if filing electronically. A $260-520 penalty will be assessed for each return that is not timely or correctly filed.

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1095-C: Reporting Requirements: A Step-by-Step Guide

  1. 1. The Affordable Care ActReporting Requirements: A Step-by-Step Guide to Form 1095-C 1
  2. 2. These slides were last updated on October 26, 2016. 2
  3. 3. First things first, this is not a basic guide. 3
  4. 4. This guide assumes you know how the Employer Mandate basically works under the Affordable Care Act. 4
  5. 5. Which brings me to a very important point. The reporting requirements are their own separate, free-standing requirement under the Affordable Care Act. 5
  6. 6. I’ve helped thousands of employers since the Affordable Care Act was signed on March 23, 2010. 6
  7. 7. And not from some ivory tower or some talking-head booth, but from working side by side with employers trying to figure this thing out. 7
  8. 8. These slides were viewed over 100,000 times for the 2015 tax year (with no help from the underlying material because IRS regulations are where good times go to die). 8
  9. 9. I am updating these slides because many of you are repeat visitors that have emailed me asking me where the 2016 slides are. 9
  10. 10. What is new for 2016? Lots of little things and a few big things that we will tackle in due course. 10
  11. 11. I’ve written three editions of a comprehensive guide on the Affordable Care Act called The Employer Mandate Handbook. The third edition was released in September 2015 (and I am currently working on the fourth edition for release in January 2017). 11
  12. 12. When I wrote my academic articles and books, I cited every legal authority I could so people could verify my analysis. 12
  13. 13. I have been quoted in the Houston Chronicle, Forbes, and New York Times. 13
  14. 14. I have spent years working on this stuff every day. 14
  15. 15. But even after all of that, I don’t know everything, and you should run (very fast) from anyone that claims they do. 15
  16. 16. What I do know is that as far as the reporting requirements are concerned, it is irrelevant whether you are offering insurance or not during 2016. 16
  17. 17. If you are an Applicable Large Employer or Applicable Large Employer Member during 2016, you must comply with the requirements that follow. 17
  18. 18. Again, it does not matter if you had fewer than 99 full-time employees or their equivalent during 2015 or 2016. 18
  19. 19. It does not matter if you have a non-calendar year plan that has not yet come up for renewal in 2016. 19
  20. 20. The only thing that matters is whether you are an Applicable Large Employer or Applicable Large Employer Member during 2016. 20
  21. 21. If you do not know the answer to the last slide . . . 21
  22. 22. Stop. Investigate. Then Come Back. 22
  23. 23. Welcome back. 23
  24. 24. You might be wondering what is the ultimate goal of all of this reporting. 24
  25. 25. Fair question. 25
  26. 26. These reports serve two ultimate functions: 26
  27. 27. The IRS has to keep track of two groups of people: 27
  28. 28. Under the Individual Mandate, the IRS has to identify which Americans have medical benefits and which do not. Those that do not, and don’t have an authorized excuse, will pay a financial penalty. 28
  29. 29. Under the Employer Mandate, the IRS has to identify whether Applicable Large Employer Members offered health insurance, or the right kind of health insurance, to full-time employees in assessing fines for those employers. 29
  30. 30. Form 1095-C collects information to help the IRS enforce the individual and employer mandates. 30
  31. 31. Form 1095-C has three parts. 31
  32. 32. The parts you complete as an employer depend on the type of insurance coverage you offer (self-insured vs. fully insured) and the employment relationship of the recipient of your offer of coverage (employee vs. non-employee). 32
  33. 33. Some companies buy their health insurance from a carrier (usually through a broker). This means the company’s health insurance is fully-insured. 33
  34. 34. Other companies run, for lack of a better word, their own insurance companies (called self-insured plans) and do not buy insurance from an insurance company. 34
  35. 35. The IRS wants information from both employers and insurance companies to help it enforce the employer and individual mandates. Some employers are, essentially, both. That is why self-insured employers have to go a bit further than fully-insured employers with regard to these reporting requirements. 35
  36. 36. In order to complete and file the correct forms, you need to know whether you have a fully insured or self-insured health plan. 36
  37. 37. If you do not know whether your company has a self-insured or fully insured health plan for employees . . . . 37
  38. 38. Stop. Investigate. Then Come Back. 38
  39. 39. Welcome Back. 39
  40. 40. Now you should know: (1) whether your company is an ALEM, and (2) whether it fully or self-insures its employee benefits. 40
  41. 41. The proper forms for your particular situation will appear on the next three slides depending on your situation (both as an employer and the individual receiving the Form 1095-C). Study them carefully to ensure you pick up the right form and complete the appropriate parts. 41
  42. 42. 42 Employer Type Must File Self-Insured Applicable Large Employer Member  Form 1095-C. Complete Parts I, II, and III for each full-time employee. Fully complete only Parts I and III for each non-full-time employee covered under the self-insured plan (and only complete Line 14 of Part II).  Forms 1095-C must be filed with the IRS by March 31 (if filing electronically).  A copy of Form 1095-C must be furnished to the individual full-time employee by January 31.
  43. 43. 43 Employer Type Must File Fully-Insured Applicable Large Employer Member  Form 1095-C. Complete Parts I and II. This form must be completed for each full-time employee.  Forms 1095-C must be filed with the IRS by March 31 (if filing electronically).  A copy of Form 1095-C must be furnished to the individual full-time employee by January 31.
  44. 44. 44 Employer Type Must File Self-Insured Non-Applicable Large Employer Member  Form 1095-B. Complete Parts I, II, III, and IV. This form is completed for each employee covered under the self-insured plan.  Form 1094-B. Complete entire form. This form will be used to transmit Form 1095-B to the IRS.  Forms 1095-B and 1094-B must be filed by March 31 (if filed electronically).
  45. 45. Mario, you forgot one. 45
  46. 46. What if my company is neither an ALEM nor is self-insured? 46
  47. 47. I forgot nothing. 47
  48. 48. If you are a small company (less than 50 full-time employees or their equivalent) that buys their insurance from a carrier (typically through a broker), you have no reporting requirements. 48
  49. 49. The rest of you should know by now which forms you need to complete based on your status and the status of the recipient. 49
  50. 50. So why would I update these slides in October? First, the final instructions were released a few weeks ago. Second, I have hope that people will learn from their mistakes and get an earlier start this year. Many late-starters were contacting me—even with the massive extensions last year—at the 11th hour. 50
  51. 51. Let’s get to it then. 51
  52. 52. The probability that the IRS is going to give another extension like the one last year is nil in my opinion. 52
  53. 53. Get it together. Now. 53
  54. 54. Form 1095-C must provided to employees by Jan. 31, 2017 54
  55. 55. You can get—probably at most—a 30-day extension on that deadline by by doing this: Send a letter that includes (a) filer name, (b) filer TIN, (c) filer address, (d) type of return, (e) a statement that the extension request is for providing statements to recipients, (f) reason for delay, and (g) the signature of the filer or authorized agent to the IRS. Your letter has to be in the mail by January 31, 2017. 55
  56. 56. But where do I send this letter to? 56
  57. 57. Attn: Extension of Time Coordinator, 240 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430. 57
  58. 58. Keep in mind that even if the IRS gives you an extension, your employees will start to come around asking for their Form 1095-C in January because they need the information to complete their own tax returns. 58
  59. 59. Practical Tip: If you are going to ask the IRS for an extension, tell your employees as soon as possible so that they can plan accordingly on their ends. Full-time employees expect to get their forms in January. 59
  60. 60. There are two deadlines (just like in W-2 land). The first we just talked about, the one for employees. The second we are about to talk about, for the IRS. 60
  61. 61. 61 Form 1095-C must be provided to the IRS by March 31, 2017 (filing electronically) Form 1095-C must provided to the IRS by Feb. 28, 2017 (filing paper)
  62. 62. I am probably going to need an extension on that one too. 62
  63. 63. Form 8809 is for you then 63
  64. 64. Now that you know about the deadlines, let’s talk about what happens to you if you miss them. 64
  65. 65. Spoiler alert: it is not good. 65
  66. 66. Missing either the employee deadline or missing the electronic or paper IRS deadlines will cost you a significant sum of money (between $260-$520 per form). 66
  67. 67. Now you have the updated deadlines and the penalties for 2017. 67
  68. 68. One last point to orient you to what the heck we are up to here: 68
  69. 69. Form 1095-C is a close relative of Form W-2. Most of the same rules apply to this “family” of documents (including the somewhat burdensome electronic-receipt rules). 69
  70. 70. Instead of disclosing wages, compensation, and tips (like a W-2), Form 1095-C discloses healthcare information including the kind of insurance offered, if any, its price point to the employee, and the moment at which it was offered, among other things. 70
  71. 71. Alright, enough background. Let’s get in there and get some forms completed. 71
  72. 72. You can download Form 1095-C directly from the IRS here: Form 1095-C 72
  73. 73. Always ensure you have the most up-to-date form by going straight to the IRS website. Indeed, the IRS released different versions of these forms while these slides have been online (that’s why you should check back often as I update these slides regularly as I receive email questions and the IRS releases new guidance). 73
  74. 74. That’s right, resist the urge to print 200 of them and stuff them in a drawer and just keep going back to the drawer—this happens, a lot. 74
  75. 75. Ensure you have the correct form by checking the top-left corner of the form in front of you. 75
  76. 76. 76
  77. 77. 77
  78. 78. 78 The text inside the orange box is new for 2016. It seems that many employees and tax preparers attached their Form 1095-Cs to their tax returns.
  79. 79. What the heck is this? 79
  80. 80. 80 If you make a mistake and want to correct it by sending in a subsequent corrected form, you would check the “corrected” box. Ensure you give the employee a corrected version as well.
  81. 81. 81 The IRS clarified for 2016, that the VOID box, enclosed in orange below, is not to be used by employers or employees. It’s an IRS- only club.
  82. 82. Next, ensure you have the correct form version (especially in in 2017 because there are now two versions floating around—2015 and 2016). In 2017, you want the form that looks like the below on the top-right corner. 82
  83. 83. It probably seems silly to have spent so much time on ensuring that you have the correct form, but trust me, it’s an common mistake. 83
  84. 84. Let’s move on to the substance of the form. 84
  85. 85. Part I, shown below, identifies the employee and the ALEM where that employee works. 85
  86. 86. Pretty basic stuff. If you don’t know your employee’s name, you have bigger problems than ACA compliance. 86
  87. 87. Pretty basic stuff again. If you don’t know your employee’s Social Security Number, you have bigger problems than ACA compliance (but as the whole TIN debacle shows, many employers don’t). 87
  88. 88. Practical Tip: The less you ask employees for private, sensitive information like Social Security Numbers, the better off you are as an employer. Social Security Numbers for this purpose should be harvested from other employee files already on record with an employer. 88
  89. 89. The important thing to keep an eye on for Line 3 is that it’s below Line 1 and 2, not to the right. The Form should be completed 1-6 and then 7-13. 89
  90. 90. Remember, this is the employee’s address, not the company’s address, or the physical location where the employee works) 90
  91. 91. You should be done now with the top-left side of Part I. 91
  92. 92. Now you are ready to move to the top-right portion of Part I. 92
  93. 93. This is the legal name of the particular legal entity where the person on Line 1 works. 93
  94. 94. So for example, assume you have three legal entities in your business: Office Inc., Delivery Inc., and Cleaning Inc., The name of the overall business is Bob’s House of Widgets. Line 7 is asking for one of those three legal entities (ALEMs), not the overarching name of the company or the name people know that company by. Ensure you put the ALEM that employs the particular person for which you are completing the Form 1095-C. In the example above, if you are filling in Bob’s House of Widgets, you are doing it wrong. 94
  95. 95. Next, you need to fill out your EIN on Line 8. Verify that the name that appears on Line 8 here matches the name and EIN provided on the corresponding Form 1094-C. 95
  96. 96. What do I do if I do not have an EIN? Can I use my Social Security Number or some other number? 96
  97. 97. No. If you do not have an EIN number you need to go get one because you cannot file this form without such a number. 97
  98. 98. Stop. Investigate. Then Come Back. 98
  99. 99. Welcome Back. 99
  100. 100. Line 9 seems simple enough. The problem arises when you have corporate structures and multiple addresses. 100
  101. 101. You could either put the address of the branch, location, or site, or you could put the corporate headquarters address. 101
  102. 102. Regardless of which address you end up reporting, ensure that the address in Line 9 matches the employer address on the corresponding Form 1094-C (another form that acts as a coversheet for the 1095-C, Like a W-3 for a W-2). 102
  103. 103. I recommend that you put the telephone number of someone that will promptly reply to any employee inquiry. 103
  104. 104. Again, just as in Line 9, ensure these items match on the corresponding Form 1094-C. 104
  105. 105. Like in 2016, in 2017, this row is optional. 105
  106. 106. For the 2017 eager beavers out there though, you just put the two- digit number for the month in which your plan starts. For example, if your plan starts in November, you would enter 11 in this box. If you have no plan, 00 is the ticket. 106
  107. 107. Lines 14 through 16: Welcome. To. The. Show. 107
  108. 108. Take a deep breath because here we go. 108
  109. 109. People get the most tripped up on Form 1095-C answering Lines 14-16. Keep the next slide in mind as you try to figure them out in more detail in the slides that follow. 109
  110. 110. Line 14: What, if any, medical benefit did you offer the employee? Line 15: How much did that medical benefit cost the employee if you are claiming it was a QHP (or fully compliant insurance)? Line 16: What did the employee do when you offered him/her medical benefits or, what excuse did you have for not offering the employee medical benefits. 110
  111. 111. Line 14 gives people lots of headaches because of its code structure. The line is basically asking what kind, if any, of medical benefit you offered the particular employee or non-employee. 111
  112. 112. Let me be emphatically clear: Line 14 only cares about what you offered that employee. Not what they took, what you offered Billy Bob in the next cubicle, or offered the CEO. Line 14 does not care about your excuses. So if you start a sentence with, “I didn’t offer insurance because [blah] [blah] [blah].” Line 14 only cares about the fact that you did not offer medical benefits. The blah blah blah part comes into play on Line 16. But on Line 14, you would put that you did not offer insurance. 112
  113. 113. At any rate, Line 14 gets tricky pretty fast because you can’t just write in whatever your health plan is. 113
  114. 114. Instead, you have to review a series of riddles codes and identify where you fall as an employer, where the individual recipient falls, and where the medical benefits fall. 114
  115. 115. Many times this is where the flipping back and forth between the instructions and the Form itself frustrates most people. 115
  116. 116. I have simplified the process. 116
  117. 117. 117 Code Series 1 Use When: Type of Offer Cost 1A Full Time Employee: MEC & MV EE Pays < $94/month Spouse: MEC or More N/A Dependent: MEC or More N/A 1B Full Time Employee: MEC & MV N/A Spouse: None N/A Dependent: None N/A 1C Full Time Employee: MEC & MV N/A Spouse: None N/A Dependent: MEC or More N/A 1D Full Time Employee: MEC & MV N/A Spouse: MEC or More N/A Dependent: None N/A 1E Full Time Employee: MEC & MV N/A Spouse: MEC or More N/A Dependent: MEC or More N/A
  118. 118. 118 Code Series 1 Cont’d Use When: Type of Offer Cost 1F Full Time Employee: MEC N/A Full Time Employee + Spouse: MEC N/A Full Time Employee + Dependent MEC N/A FTE + Dependent + Spouse MEC N/A 1G Non-Employee: MEC or More N/A Spouse: None N/A Dependent: None N/A 1H Employee: None N/A Spouse: None N/A Dependent: None N/A 1i Reserved (Ed. Note: Hurray! This problematic code section is gone in 2016). 1J Employee: MEC & MV N/A Spouse: Conditional MEC or More N/A Dependent: None N/A 1K Employee: MEC & MV N/A Spouse: Conditional MEC or More N/A Dependent: MEC or More N/A
  119. 119. The reporting on Line 14 requires employers to track offers made to the particular employee being reported on in the Form 1095-C you are completing. 119
  120. 120. So when you offer Billy Bob Plan A, but Lethargic Larry only gets Plan B, on Billy Bob’s Form 1095-C you do not mention what you offered Larry. Likewise, on Larry’s Form 1095-C, you do not mention what you offered Billy Bob. 120
  121. 121. Every employer is different so there is a corresponding code for virtually every situation. To make sense of my cheat sheets though you do need to have a quick primer. 121
  122. 122. MEC & MV: The plan must provide minimum essential coverage and minimum value. These plans are often called Bronze, Silver, Gold, or Platinum. If you don’t know whether you are offering this type of plan, this is what you do: 122
  123. 123. Step 1. Pick up a telephone. Step 2. Call the person you buy your insurance from. Step 3. Politely ask if the insurance they sold your company is at least bronze under the Affordable Care Act. Step 4. If they know the answer to the question, you are all set. Step 5. Come back to these slides. 123
  124. 124. MEC & MEC or More: A MEC plan is a medical benefit plan that is more limited than a MEC & MV plan. Some employers are offering folks MECs, MECs or More, and MEC & MV, and everything in between. Again, if you don’t know where your medical benefits fall, you need to find out (go back to slide 123 for instructions). 124
  125. 125. Conditional MEC or More: This is new for the 2016 tax year. The simplest way to explain what this is to give you the example of when this is most likely to apply. For example, suppose an employer goes to a full-time employee and says, “Look Billy Bob, I’ll offer your wife coverage, but I know she is employed. I am willing to cover her so long as her employer does not offer her health insurance.” This is a conditional offer to Billy Bob’s spouse. This new development means we need two new codes in 2017 for the 2016 tax year, 1J and 1K. 125
  126. 126. MEC, MEC or More, Conditional MEC, MEC & MV, still confused. 126
  127. 127. Alright, remember, this is not a basic guide about the ACA, I warned you that I would assume you knew a little bit about what we are talking about. But, I will say this: If avoiding all penalties is your game, getting your insurance to qualify as a QHP should be your aim. 127
  128. 128. Do I really have to learn all these codes? 128
  129. 129. No, not really. Most employers will use no more than two or three. Once you know the ones that apply to your employer, you should be OK moving forward, so long as you don’t make major changes to your offerings. 129
  130. 130. So once you know the right offer code (thanks to the previous slides), the next part is to figure out how long the employee has had that particular offer during a calendar year. 130
  131. 131. If the employee had the same offer for all 12 months in the year, then you just fill out the “All 12 Months” box with that code. 131
  132. 132. If the employee only had that offer for less than 12 months, you have to fill out the form, month-by-month, with the appropriate code. 132
  133. 133. Frequently Asked Question: Does someone in a lawful waiting period qualify as having been offered insurance during a month in which the employee was in a waiting period? 133
  134. 134. No. Someone in a waiting period did not get an offer of coverage because he/she were in a waiting period (remember, the reason for not offering an employee medical benefit is irrelevant on Line 14). 134
  135. 135. Frequently Asked Question: I did not offer someone insurance because they did not work for me during that particular month. That means I don’t have to put 1H right? 135
  136. 136. Wrong. Someone who did not work for me did not get an offer of coverage because they did not work for me (remember, the reason for not offering an employee insurance is irrelevant on Line 14). 136
  137. 137. You should get the point by now. If your hypothetical contains the phrase, “I did not offer the employee medical benefits” it will always be 1H regardless of the reason for not offering the employee medical benefits. 137
  138. 138. Frequently Asked Question: I offered a full-time employee a QHP but they turned me down because he or she had insurance with a spouse. What do I put in Line 14? 138
  139. 139. “I offered a full-time employee insurance but they waived it because they are on their spouse’s insurance . . . Line 14 does not care about waivers, it only cares about what you offered the full-time employee. Everything after the “but” is irrelevant. So if you offered a full-time employee a QHP and at least MEC to his or her dependents and spouse, you would put 1E on Line 14. 139
  140. 140. You should get the point by now. If your hypothetical contains the phrase, “I did offer the employee insurance” it will always be something in the 1 series regardless of whether the employee accepted the offered medical benefit. 140
  141. 141. If the most you offered a full-time employee was a MEC plan, you don’t have to fill out Line 15 because the entire point of Line 15 is verifying that a particular plan offered on Line 14 was a QHP. 141
  142. 142. If you do not claim to have offered a full-time employee a QHP, you can leave Line 15 blank (i.e., 1F, 1G, or 1H appear on Line 14). 142
  143. 143. Conversely, if you do claim to have offered a full-time employee a QHP, you must put something in Line 15, even if it is $0.00 (in other words, you have 1B, 1C, 1D, 1E, 1J, or 1K on Line 14). 143
  144. 144. Line 15 only applies to full-time employees that the employer claims was offered a QHP on Line 14. 144
  145. 145. If you entered 1A on Line 14, you must leave Line 15 blank (in fact, it’s against the rules to complete it) for those months in which you used one of those two codes. 145
  146. 146. If you entered 1G on Line 14, you also do not have to fill out Line 15 or Line 16 for those months in which you used that code. 146
  147. 147. Note: In the final 2016 instructions, the IRS clarified that if you entered 1G on Line 14, it must be for all 12 months. If you find yourself entering 1G for less than 12 months on Line 14, you are doing it wrong. 147
  148. 148. Line 15 is for employers that claim to have offered a full-time employee a QHP (defined earlier). In order to have offered a valid QHP, employers may not have charged full-time employees above a particular threshold. Line 15’s goal is assessing what a full-time employee was charged for the claimed QHP to verify the medical benefit offered as a QHP. 148
  149. 149. Mario, I have this NEED to complete Line 15. Why do I leave it blank (or put $0.00) if I use 1A/1G? Please let me just stick a number in there, it will make me feel better. NO! Again, like I said in the last slide, the entire point of Line 15 is determining whether a particular full-time employee was asked, by you Mr. Employer, to pay more than 9.5% of their income. 1A has a built-in financial threshold (remember that whole $94?) so by putting 1A on Line 14 you are actually killing two birds lines with one stone code. Likewise, 1G is for non-full-time employees. The IRS does not care under 1095-C what non-full-time people paid, so, that’s why you leave it blank. 149
  150. 150. Again, if you did not offer a QHP, or offered just a MEC, skinny, etc., plan, or are completing a Form 1095-C for a non-employee who enrolled in your self-insured coverage, you do not have to complete Line 15. 150
  151. 151. Line 15 is just like Line 14 insofar as if you charged a full-time employee the same cost month after month, for all 12 months, you can just fill out the first “All 12 Months” box. Otherwise, you have to disclose how much you charged such employees every month. 151
  152. 152. Also note what Line 15 is actually asking you to report. It is asking for the employee share of the monthly premium for the lowest cost, self-only minimum value coverage. 152
  153. 153. Some people sign up for family coverage and pay more in premiums than people who just sign themselves up. Line 15 does not care about families or dependents; it is only asking about the self-only employee coverage cost. 153
  154. 154. Likewise, some employers offer employees a bronze, silver, gold, and platinum plan. 154
  155. 155. Line 15 only cares about the lowest plan cost. So if you offer gold and bronze, put bronze employee-only cost in there even if the particular employee decided to go with the gold plan. 155
  156. 156. Line 15 only cares about the lowest plan cost. Some of you may have a bronze plan as the lowest, others silver, others gold. The lowest plan you offer, its price to the employee, for self-only coverage, that’s what goes on Line 15. 156
  157. 157. Frequently Asked Question: What if my full-time employees pay nothing? 157
  158. 158. 1. Go You! 2. You put $0.00 on Line 15. 158
  159. 159. What is going on here? 159
  160. 160. The basic point of Line 16 is to figure out what the employee did once you offered coverage (accepted, rejected, etc.). And if you did not offer, a reason why (for example, 2D has a series of allowed reasons for not making offers of coverage to otherwise eligible employees). 160
  161. 161. This is where most employers that tried to give an excuse on Line 14 should cross-check their excuse against the series codes and enter them on Line 16 (waiting periods, non-employed employees, etc.,) 161
  162. 162. For example, let’s say you hire a full-time employee in January 2016, but make them wait for two months during a waiting period. For January and February you would put “2D” on line 16 for those months (and 1H on Line 14). 162
  163. 163. Just like Line 14, there is a series of codes that apply depending on several variables. I made it easy on you again. 163
  164. 164. 164 Code Series 2 Use When: 2A Employee not employed during any day of the month. 2B 2B Scenario 1 2B Scenario 2 Recipient was not an employee, and recipient did not enroll in coverage offered. Termination/Separation month if health plan does not cover employee for the rest of the month. 2C Employee enrolled in health coverage offered every day of the month. 2D Employee in Limited Non-Assessment Period: • First Year As ALE – January through March • Waiting Period under Monthly Measurement Period • Waiting Period under Look-Back Measurement Period • Initial Measurement and Administrative Period • Period Following Change in Status • First Calendar Month of Employment 2E Multiemployer Interim Rule Relief (Typically Union Plans) 2F Unaccepted Offer with W-2 Safe Harbor 2G Unaccepted Offer with Federal Poverty Guideline Safe Harbor 2H Unaccepted Offer with Rate of Pay Safe Harbor 2I Reserved (Removed by 2016 instructions from 2015 options)
  165. 165. Sometimes no code will apply and you will have to leave Line 16 blank. It’s better to leave it blank than to purposefully put something that is wrong and get audited. 165
  166. 166. Indeed, some people got it pounded in them—not by me—to always put 2C no matter what (“when in doubt, go with 2C”). This was terrible advice and if you read the 2016 instructions carefully, you can see that the IRS was rather annoyed by the 2C-or-Death folks out there. 166
  167. 167. “Do not enter code 2C in line 16 for any month in which the multiemployer interim rule relief applies (enter code 2E). Do not enter code 2C in line 16 if code 1G is entered in line 14. Do not enter code 2C in line 16 for any month in which a terminated employee is enrolled in COBRA continuation coverage or other post-employment coverage (enter code 2A). Do not enter code 2C in line 16 for any month in which the employee enrolled in coverage that was not minimum essential coverage.” Straight from the IRS folks. 167
  168. 168. On more time: Sometimes no code will apply and you will have to leave Line 16 blank. It’s better to leave it blank than to purposefully put something that is wrong and get audited. 168
  169. 169. So let’s talk about waivers again. One of the most emailed questions is some variation of this: “I offered my full-time employees great insurance at ACA-affordable prices but they turned me down and went with their spouse’s insurance. What do I do?” Okay, we already talked earlier about what you do on Line 14. On Line 16, what you put depends on which affordability safe harbor you relied on (assuming you relied on one). So if your offer was legally affordable, you put 2F, 2G, or 2H, depending on which you used. Someone that takes the insurance obviously gets 2C. And if the person did not take your insurance and it was not legally affordable (i.e., 2F, 2G, or 2H do not apply), you leave it blank. 169
  170. 170. If you buy your insurance coverage from a carrier / broker You are done! Now you just have to do this for every full-time employee your ALEM employs. 170
  171. 171. If you self-insure your health benefits, you have to fill out Part III which asks for information about covered individuals (not necessarily employees) to satisfy the individual mandate. 171
  172. 172. Part III looks like this: 172 The language in the orange box above is new for 2016, and makes it clear that you are to include the employee for which you are completing the Form 1095-C in Part III. Many people were told to only put dependents there.
  173. 173. But remember: Part III is for the individual mandate (the IRS is tracking individuals) whereas Parts I and II are about the employer mandate. If you leave the employee off of the individual mandate list (Part III), how is the IRS supposed to know that the employee is covered for the purposes of the individual mandate? It can’t, which is why that language in the orange box was added in. 173
  174. 174. If you buy your insurance from a broker / carrier, insurance companies have to provide this information to the IRS via a separate form. 174
  175. 175. If you self-insure, you have to provide information for non- employees. Otherwise, the IRS would not be able to keep track of them without your help. 175
  176. 176. The first portion of Part III is for covered individuals (typically, the employee, their spouse, and dependents, but it could also include non-employees (COBRA-covered former employees, directors, and retirees). 176
  177. 177. To the right, you will note that you are asked to either provide the Social Security Number/TIN or the date of birth of the covered individual. For covered individuals who are not the employee listed on Line 1, you can use a Taxpayer Identification Number instead of a Social Security Number. This was made explicit on the new 2016 form with the addition of the text in the orange boxes. 177
  178. 178. And again, like with full-time employees, you will be asked to verify whether the covered individual had coverage for all 12 months or if not, to break it up into a month-by-month report. 178
  179. 179. Importantly, unlike earlier in Part II, here if the covered individual (the employee or a dependent) had coverage for one day, you can report that they had coverage for the entire month. 179
  180. 180. Boom. The End. 180
  181. 181. Mario, I am freaking out right now because I do not know what is going on with these reports! 181
  182. 182. It is going to be okay. 182
  183. 183. Still. Freaking. Out. 183
  184. 184. I have another set of a bit more detailed slides (how is that possible, right?) for sale ($7.50). Some of these slides are on that deck, but that deck has several slides / visuals that are not here. This slide deck has 193 slides, that deck has 256 (that’s a lot more information). I also tackle such timeless riddles like: 184
  185. 185. What is the difference between 1E / 1A? Do I have to leave Line 16 blank if I put 1A in Line 14? How do 1A and Line 22A on 1094-C interact? How do I deal with COBRA employees? And many more riddles that presently escape me. 185
  186. 186. Note: I tried my best to ensure that these slides are as accurate and informative as possible. If I made a mistake, please send corrections to my email address which appears in these slides. 186
  187. 187. Extra credit for those folks that send corrections with supporting authority. 187
  188. 188. Comments and GENERAL questions should be sent to me via email at the following email address: theACAguy@gmail.com. Also email me to get added to my mailing list. Please do not send me angry emails complaining about the ACA itself. I can’t much do anything about that one. Also, please note that sending me an email does not create an attorney-client relationship nor is anything you send me privileged. I reserve the right to quote your questions and my answers on my website, slides, etc. These slides are also copyrighted. © 2015-2017. All Rights Reserved (please don’t steal my stuff). 188
  189. 189. Finally, I do not email these slides out to anyone. I provide these for free here, and I want to keep it that way. I once went to a paid- for seminar where someone had “borrowed” my slides and was charging people for the privilege. Not cool and that’s why we can’t have nice things. Please do not email me asking for copies of the slides to be sent to you—I will delete your email and not even respond (and not put you on my mailing list). 189
  190. 190. If you must absolutely have a copy of these slides because you hate having to come back here, want to review them without having to have access to the Internet, want more slides that go into greater detail than those found here (on 1A and COBRA in particular), then I heard you last year. As of this year—by popular demand—you can buy the premium/downloadable version of these slides and use them at your leisure (for the low, low price of $7.50). 190
  191. 191. Think about it like this: If you hired someone to come explain this to you at an hourly rate of $7.50, just above the federal minimum wage, it would surely cost you more than $7.50. I get $2.50 for every sale, and it goes straight to paying off the federal student loans that I had to take out to put myself through college and law school. BUY THE SLIDES 191
  192. 192. ABOUT MARIO. Mario K. Castillo is the Vice Chancellor & General Counsel of the Lone Star College System, one of the largest colleges in the United States, located in Houston, Texas and is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. Prior to joining the System, he was a labor, employment, and benefits partner at the law firm of Monty & Ramirez LLP in Houston, Texas, where he helped employers avoid or minimize liability and defended them when litigation was necessary. Mario also completed a four-year term as briefing attorney to the Honorable Felix Recio of the Southern District of Texas prior to joining Monty & Ramirez. Mario received a Juris Doctorate from the Maurer School of Law at Indiana University—Bloomington. Prior to attending law school, Mario received a Bachelor of Arts in Government from the University of Texas in Austin. DISCLAIMER. This presentation is for informational purposes only and provides general information concerning the Affordable Care Act to help you identify when you may need additional advice. It is not an exhaustive treatment of the statutes, case law or regulations that are involved with the subject. Please recognize that the law is developing rapidly in this area and you will want to obtain current legal advice on your specific situation before taking action. 192

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