ACA Case Scenario: How to Complete the 1095-C During a Retirement Year
If you have started down the worm-hole of completing your annual 1095-C statements, you’ve probably hit some confusion upon reaching Part II. With 9 coded options to plugin for each month of line 14 (1A-1I) and eight coded options for line 16 (2A-2H), things can start to get tricky.
The standard majority of cases are not the problems. Rather, it’s the odd-ball scenarios that generate the biggest stalls in 1095-C production, causing most to flee to google for guidance on their specific scenario. In this case, we will be looking at how an employee retirement and enrollment in an employer's self-funded retirement plan impacts the 1095-C.
At Benetech, we will be publishing a series of 1095-C case scenarios over the coming months as we enter into the first round of annual reporting. At the end of the blog will be the option to submit your specific 1095-C case that is causing you the most heartburn, and we’ll work on answering as much as we can in the coming months.
The more you submit, the more we will research and write.
The following case was developed from a scenario presented by the Los Angeles Unified School District. Names and plan information have been adjusted.
George has been a full-time employee at Alpha Central School District (CSD) for thirty years, and will be retiring in May. He is currently enrolled in MEC that extends to his wife and dependents as of January 1. Alpha CSD offers a fully-insured plan for active employees, and a self-insured plan for retirees. George retires on May 23, and he, his spouse, and dependents transfer over to the Districts retirement health insurance plan on June 1. The single-coverage only option offered to George costs $115/month, and does not meet the requirements of a Qualifying Offer. It is affordable to the ACA’s standards.
How will this reflect in George’s 1095-C Part II?
Why? Alpha CSD only has IRS Code 6056 reporting requirements for George during the month that he was a full-time employee. Since George retired in May, and his active employee benefits extended to the end of his retirement month, the District will report having offered George, his spouse, and dependents coverage by reporting 1E in line 14 from January through May. It would record the lowest cost single coverage employee monthly premium payment in line 15, and, since George accepted the District's offer, record 2C in line 16 for the months of January through May.
After George retires, Alpha CSD is no longer required by the ACA to extend any MEC offer. Despite the fact that the District continues to offer benefits to its retirees, this does not need to be reported in Part II of the 1095-C. Regardless of whether or not the District's retiree health benefits plan was fully-insured or self-funded, George's Part II would look the same.
Because Alpha CSD has only a self-funded plan for its retirees, and George has accepted that offer, his Part III will look as follows.
Notice that the first 5 months of the year from January through May are left blank. This is because George, his spouse, and his dependents were enrolled in the districts fully-insured plan. For those months, the 6055 reporting requirements (6055 requirements pertain to reporting who is enrolled in coverage) would be reported by the insurance carrier of George's family plan. For the months from June through December, the District as a self-funded plan sponsor assumes the responsibility for 6055 reporting, and thus satisfies this requirement by using Part III of George's 1095-C.
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This blog is not intended to be legal advice nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice.